The Logistics Impact of a Mixture of Order-Streams in a Manufacturer-Retailer System

Ananth V. Iyer () and Apurva Jain ()
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Ananth V. Iyer: Krannert Graduate School of Management, 1310 Krannert Building, Purdue University, West Lafayette, Indiana 47907-1310
Apurva Jain: University of Washington Business School, Box 353200, Seattle, Washington 98195-3200

Management Science, 2003, vol. 49, issue 7, 890-906

Abstract: We model a supply chain with two retail warehouses that place replenishment orders with a common manufacturing capacity. The two retailers differ in the variability of their order-streams. The order-stream from one retail warehouse is modeled as a Poisson process and from the other as a hyperexponential renewal process. Each retail warehouse uses a base-stock policy to place replenishment orders with the manufacturer. The manufacturer is modeled as a first-come-first-serve, single exponential server queue. We analyze the supply-side impact of this mixture of order-streams received by the manufacturer on both retailers. An exact analysis of this base-model generates closed-form expressions for distributions of the lead-time, outstanding orders, and expected inventory costs for each retailer, and leads to comparative results about the two retailers- performance measures. The base-model is extended to accommodate finished goods at the manufacturer, more than two retailers, and bulk-arrivals. We use the model to suggest managerial insights about the impact of the presence of a high-variability retailer on other retailers who share capacity, the distorting impact of manufacturer finished goods inventory on retailer incentives, and the incentives for retailers to participate in variability-reduction programs in the grocery industry.

Keywords: Queues with Multiple Arrival Processes; Retail Promotions; Stochastic Inventory/Production Systems (search for similar items in EconPapers)
Date: 2003
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:49:y:2003:i:7:p:890-906

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